A joint bench of the Supreme Court comprising Justices Dr. Anandamohan Bhattarai and Hariprasad Phuyal heard a writ petition filed by Lillamani Nyaupane against the Citizen Investment Fund, the Ministry of Finance, the Inland Revenue Department and the Large Taxpayer Office. The petition concerns withholding tax deducted from a retirement benefit linked to service at Investment and Finance Company Limited.
The petitioner stated that, after the end of a six-year contract as Executive Chief, a letter dated 2075.11.23 directed payment of retirement benefits through the Citizen Investment Fund. The amounts recorded were Rs. 5,64,60,332.129 for 2075 and Rs. 1,39,03,648.148 for the period before 2075, totalling Rs. 7,03,63,981.277. The petitioner argued that only 5% tax should have been withheld on the pre-2075 amount, but that the sum actually credited to the savings account indicated withholding at 15%.
Relying on Article 151(1) of the Constitution and Section 88(1) of the Income Tax Act, 2058, the petitioner sought a mandamus directing cancellation of the additional withholding and payment of the balance after applying only 5% tax. Counsel for the petitioner submitted that the additional 10% deduction was unlawful.
The respondents disputed the claim. The Citizen Investment Fund said it had deducted tax in accordance with the Income Tax Act and instructions received from the Large Taxpayer Office. The Inland Revenue Department and government-side counsel argued that payments based on an employee’s own contributions may attract 5% withholding, while employer-funded or employment-income-related retirement payments may be subject to 15% withholding under the Act.
The Large Taxpayer Office stated that the Citizen Investment Fund is an approved retirement fund and that different treatment applies depending on the nature of the retirement payment. Counsel for the Fund also referred to earlier court directions and said the Fund had generally been deducting 15% on retirement fund payments unless ordered otherwise by a court.
After hearing the parties and reviewing the case papers, the Court identified the main issues as whether the retirement benefit should be taxed at 15% or 5%, whether the Fund had deducted 15%, and whether an order should be issued directing payment of the amount claimed by the petitioner. The matter was recorded as remaining under consideration for final decision.